Nick Speakman was already a successful business owner when he decided to turn his hand to winemaking. His father had passed on to him part of the family’s farmland in Essex’s Crouch Valley. With this as his base he founded Missing Gate Wines in 2018.
He was in good company. Today this area is one of the densest planted regions for vines in the country.
Speakman invested £1.5mn into planting 100 acres of vines, to produce premium still wines. Missing Gate quickly won acclaim for its 2020 pinot blanc from UK wine critics. Having previously contracted out his winemaking to reduce cash outflow, he had planned to invest another £2.5mn to expand his winemaking and hospitality facilities.
But with costs already rising, Speakman decided to wait to see what chancellor Rachel Reeves would announce in her maiden Budget last month before investing. He did not like what he heard. Both the increases in employee national insurance contributions and changes to inheritance tax relief on agricultural land would hit the business hard. He postponed his outlay and laid off three of his staff.
“I’m disappointed, frustrated, that I cannot create more value for my kids. But mostly I detest not being able to do what is obviously the right thing,” he says.
Other winery owners may go further. Making wine is no money spinner. Relatively high production costs and weaker revenue, coupled with higher taxes for small businesses may force some English wine estates to sell.
“There are lots of older owners out there . . . people who planted 20-25 years ago, have a nice house and can’t do the work any more,” thinks Stephen Skelton, a consultant at English Wine. “It’s time to move on.”
Winemaking in England has gone from a quirky hobby for weather optimists to a fast-growing industry with tourist potential. There are now more than 1,000 UK vineyards producing wine, says trade body WineGB. These covered 3,353 hectares last year, well over double the figure of 2013, according to data from Skelton. He estimates that it has climbed further to around 3,800 this year.
Some good planting weather in recent years has helped, particularly last year. Grape yields surged to the highest ever, leading to a surfeit of wine, enough for some 22mn bottles. That nearly doubled the 2022 amount, another big year.
Just as costs for energy and labour have swollen, the excess supply has put some downward pressure on English grapes and wine prices this year. Worse, a wet and chilly growing season this year meant much more work and cost for winemakers. Many of these wine estates are small operations producing insufficient revenues to cope with this shift in overheads.
Even some of the more established smaller estates are considering their options. Two of the UK’s largest wine producers, Chapel Down and Gusbourne, said this summer that they are open to offers. Chapel Down, which trades on the Aim small company market, has an enterprise value of £74mn including its debts net of cash, according to S&P Capital IQ. Clearly, that is too much money for some. By late October, Chapel Down had delayed its sale plans.
Some winemakers have already left the business. Linda and Guy Howard bought Giffords Hall Vineyard, near Bury St Edmunds, Suffolk, in 2011 after Guy retired from a finance career. After his death in late 2019, Linda continued to build the business. When an offer came along early this year to buy her vineyards, winery and the brand, she happily agreed terms as she was ready to retire.
Now a consultant to other vineyards, she’s confident she made the right decision. Howard has struggled to help her clients sell this year’s crop, after the 2023 bumper harvest. “I have never seen a year like this, without a big demand for fruit. I have never struggled to sell grapes — ever,” Howard points out. At least one of her clients also wants to sell up.
Property agents too sense some unrest. At property brokers Savills, Chris Spofforth, director for the farms and estates team, has at least two sellers in Gloucestershire and East Sussex on his books. But others could follow.
“There are more estates talking to [us] about their future. The floodgates haven’t opened, [but] the Budget has made that [future] a more precarious path to tread,” says Spofforth.
Are there enough buyers out there? Ed Mansel Lewis, Knight Frank’s head of viticulture, is hopeful. “I’m acting for an international company,” he says. “[But] there are a smaller number of businesses that can buy or merge with the sellers right now.”
Not everyone is gloomy. Despite this year’s cool and rainy conditions during the growing season, some estates still expect to produce top quality. This includes Domaine Evremond, the partnership between France’s champagne producing Taittinger family and UK fine wine distributor Hatch Mansfield. Its maiden vintage of top-quality sparkling wines will arrive in shops this spring.
“I’ve got no complaints, and with a good crop, we are very happy,” says Hatch chief executive Patrick McGrath. He believes that’s due to Evremond’s location, near Chilham in Kent. “It’s been better further east, less wet than further west.” Not surprisingly, he has high hopes for UK wine. “I still think we will see more foreign brands coming in, like Jackson Family Wines.”
One of the US’s largest producers of top-quality still wines, the Jackson Family in 2023 bought 67 acres in the Crouch Valley, today considered one of the UK’s premier regions to source grapes. It hired Charlie Holland, former chief executive and winemaker at Gusbourne in Kent, to produce sparkling wines.
“For Jacksons, this is a bit of a climate hedge,” thinks Holland. “What happens in 20 years? By that time the Crouch Valley will have established itself as a premier place to grow and make pinot noir and chardonnay.”
For now, the start ups need to focus on how to keep going in a less forgiving environment. For some, such as Martyn Pollock, at Nine Oaks in Kent, that means outsourcing some of their operations. It is these outsourcers who take the pulse of the wine community.
“Although people see English wine as expensive, it’s actually hard to cover costs,” he says. “Margins are quite thin. [Paying more for] national insurance contributions doesn’t help. It definitely informs our plans for taking on more staff.”
Even established, fully integrated premium sparkling wine producers such as Mark Driver at Sussex-based Rathfinny will feel the pain.
“The change . . . on [national insurance] is going to cost us £250,000 extra annually and that’s a huge amount of money for us.” He uses local workers for picking. “The cost of these people will rise 22 per cent.”
To reduce his initial capital outlay, Pollock chose to outsource wine production, using Defined Wines, one of a number of new businesses supplying services to smaller vineyards. While doing that sacrifices some profits, he can focus on growing sales as quickly as possible.
“People who are starting these wine businesses have limited expertise [across] agriculture, sales and winemaking. And sales is the most important of the three,” believes Henry Sugden, chief executive of Defined Wines.
At McNeill Vineyard Management, another outsourcer, founder Duncan McNeill manages 500 acres for his clients mostly in Essex. This year, he is turning away new business. “I’m now telling potential customers to hold off and wait a bit. The problem we have is the cost of production and the price of the wines.”
The cost of premium grape production in the UK is relatively high, about £2,000 per tonne, twice that on the Continent for comparable grapes.
McNeill can tell something’s amiss. “I know a number of producers and grape producers who would be open to offers. They are struggling for profitability.”
